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Report: Natural gas price hikes pushed electric rates higher in 2013

By DAVE SOLOMONNew Hampshire Union Leader

The operator of the New England power grid has completed its analysis of energy prices for 2013, and the results should come as no surprise.

Rising prices for natural gas delivered to New England pushed wholesale electricity prices in the region up by 55 percent over 2012, according to preliminary figures from ISO New England, the operator of the region’s wholesale electricity markets.

The average price rose to $56 per megawatt-hour (mWh) in 2013, up from 2012’s historic low price of $36 per mWh.

The 2013 annual average was the fifth-highest since 2003, when competitive markets in their current form were introduced in New England. The all-time high was $80 per mWh during 2008, just before hydrofracturing (or “fracking”) for shale gas in Pennsylvania and New York triggered the natural gas revolution.

In a roller-coaster ride for New Hampshire consumers, that revolution brought prices to historic lows one year before sending them soaring the next.

Natural gas is the predominant fuel used to generate the region’s electricity — about 46 percent of total generation in 2013 — so wholesale power prices tend to track the price of natural gas, according to ISO spokeswoman Marcia Blomberg.

In 2013, the price of natural gas averaged $6.97 per million British thermal units (MMBtu), up 76 percent from the 2012 record low price of $3.95 per MMBtu. The highest annual average price for natural gas in New England occurred in 2008 at $10.07 per MMBtu.

“The price of natural gas has declined significantly in New England and nationally with increasing production of natural gas from the Marcellus shale field in New York and Pennsylvania in recent years,” said Blomberg, “but the lower prices have resulted in higher demand for natural gas.”

Pipeline constraints

The crunch hit home in 2013, when the capacity of pipelines serving New England crashed under the increasing demand for natural gas to heat homes and businesses and to generate electricity.

“Pipeline constraints, particularly in winter when home heating needs raise demand for natural gas, have pushed up the average spot price for natural gas in New England to the highest in the country,” said Blomberg. “Until new infrastructure alleviates these pipeline constraints, prices for natural gas and wholesale electricity are likely to remain volatile.”

The New England governors have called on ISO to manage a process whereby ratepayers in the six states would finance long-term gas purchase contracts through their electric bills to encourage pipeline construction.

Gov. Maggie Hassan said she and the five other New England governors met with ISO and representatives of the Federal Energy Regulatory Commission (FERC) on the idea when they were in Washington earlier in the month for the winter meeting of the National Governors Association.

“There are a number of considerations that we need to address, but we are all working together on that,” she said. “It’s fair to say both the folks at ISO and FERC understand that this is a priority and that they need to be helping us to address it.”

Hassan said the private sector may eventually get pipelines built with no help from ratepayers, but the region has to pursue all possible alternatives.

“I am encouraged that there is interest from the private sector in increasing gas line capacity, and that’s certainly a factor we should consider,” she said. “It’s also really important that we do everything we can to make our energy prices more competitive with the rest of the country. That’s what I am hearing from businesses throughout the region.”